Nine dealers - in South Auckland, the central North Island, Wanganui, Wellington and Dunedin - were visited by agents posing as beneficiaries seeking quotes for fridges and washing machines to be paid by advances on their benefits, the New Zealand Herald reported yesterday.
Police were alerted after five of the dealers reportedly let the agents buy appliances worth less than the benefit advances in return for cash kickbacks or grocery vouchers, or take items such as television sets or PlayStations instead of the appliances specified.
Work and Income granted 29,145 benefit advances to buy fridges or washing machines worth a total of $13.7 million in the year to March, up from $9.5 million four years ago.
Almost 26,000 beneficiaries received cash advances for fridges or washing machines more than once in the five years to March, including 1263 who received at least five advances and 22 who got at least 10, the Herald reported.
The sting was ordered when Social Development Minister Paula Bennett heard anecdotal reports of the scam.
Social agencies said beneficiaries went along with the scam for the quick cash or luxury goods, but ended up losing because they had to repay the full advance to Work and Income.
Laura Black, of the Methodist Mission in Dunedin, said she had not heard of the scam operating in Dunedin.
However, there would always be some entrepreneur who would think of a way to get around even the tightest rules, she said.
She hoped the Government's response would not be to cut good second-hand dealers out of the loop, especially when it made tax-payer dollars go further.
Dunedin police confirmed they received a file from the Ministry of Social Development yesterday, but were taking legal advice on whether a criminal offence had actually occurred, before taking the matter any further.
Beneficiaries and dealers can be liable to up to three months' jail under the Crimes Act for obtaining goods or profits of up to $500 by deception, or a year's jail if the deception involves more than $500.
Ms Bennett yesterday warned second-hand dealers who ripped off the welfare system they would be caught.
Even if police decided not to prosecute, Work and Income would blacklist unethical traders, who would not be approved for any further payment from the department, she said.
The system was being tightened and there would be random checks on traders.
Work and Income was going to require traders it dealt with to be licensed and grants would not be made for whiteware unless it had a warranty for at lease three months.
